Higher-Tier Gasoline Price May Be Set at 45 Cents/Liter

Higher-Tier Gasoline Price May Be Set at 45 Cents/LiterHigher-Tier Gasoline Price May Be Set at 45 Cents/Liter

The higher-tier price for the domestic supply of gasoline will likely be set at 15,000 rials (around 45 cents) per liter.

The 45-cent price tag has been reportedly deduced after taking stock of gasoline prices at four major international gasoline market hubs—the Amsterdam-Rotterdam-Antwerp, Persian Gulf Free on Board, the Gulf of Mexico and Singapore—and factoring in a 20% value-added tax and 10% in duties, Mehr News Agency reported.

The Iranian parliament had passed a law last month that mandates the government to reinstate a two-tier pricing scheme for gasoline: a base price and a higher-tier price that kicks in when consumers exceed the consumption ceiling for the base price. The latter was subject to speculation and controversy in recent weeks. The government will retain the base price for regular gasoline at 30 cents per liter, while premium gasoline, marketed as Super, will be sold at the slightly higher price of around 35 cents.

According to the Iranian auto industry portal Asre Khodro, the real price of gasoline stands at 15,720 rials per liter, or at least 15 cents higher that the current price.

The state-run National Iranian Oil Refining and Distribution Company is reportedly finalizing the two-tier prices. As the largest subsidiary of Oil Ministry, NIORDC is Iran's top policymaking body for the supply and distribution of fuels.

  A Bone of Contention

The gasoline pricing legislation by the conservative-leaning parliament marks a setback for the government of President Hassan Rouhani who introduced a single price for the top commodity in May 2015. The government, which is expected to introduce the tiered prices by September, says it will adhere to the new legislation to avoid further friction with the outgoing parliament.

But prominent figures have lined up against the new law that will give a fresh lifeline to the disputed electronic fuel cards introduced during the tenure of former president Mahmoud Ahmadinejad nine years ago. Government spokesman, Mohammad Baqer Nobakht, and Oil Minister Bijan Namdar Zanganeh have said that maintaining fuel cards will trigger corruption.

Fuel cards served the dual purpose of allocating quotas for subsidized gasoline and keeping a tally of consumption. But the government says the unification of prices nullifies both functions and thus, makes the fuel card system useless. NIORDC chief Seyyed Nasser Sajjadi has also criticized the introduction of second-tier price, arguing that 30-cent gasoline is a well-adjusted price and leaves little incentive for gasoline smuggling.